development, and the point of needed change. Sustainability of a business depends on many leadership decision-making elements, none more important than recognizing when the business needs to change direction to continue to be viable.

Viability applies to both a business as well as to us human beings. Human beings vary in their ability to stay viable over a long stretch of time and circumstance changes. If one considers a business organization as a living, breathing organism, like a human, it must constantly re-examine and redefine itself as industries and markets change in order to remain sustainable.

Adrian J. Slywotzky, in his book, Value Migragtion, dis-cusses the “Three Stages of Value Migration” of a product and/or a business (see “The Three Stages of Value Shift” chart at right). In the first stage there is usually limited competition, high growth and high profits. In stage two there is stable competition, stable market shares and stable margins. However, in the third stage competitive intensity exists, declining sales and low profits prevail. In the paint and coatings industry, too many of our products are already in or rapidly approaching this third stage—Value Outflow. Reasons are many but one of the key reasons has to be a lack of vision among leaders.

Speaking very simplistically, when an entire business is at the end of the Value Stability stage and near the cusp of the beginnings of Value Outflow it is time for a leadership change.

There is no standard model of how a company should respond to a decline in its profitability and market position. Indeed, there can be no such model because every situation is unique unto itself. However, in most successful turnaround situations, a number of common features are present and include changing leadership, changing strategy and changing the organization to enhance the successful implementation of the new strategy.

Because the past leadership bears the stigma of failure, new leadership is an essential element of most successful turnarounds. Often, the new leader is from the outside. New leadership from the outside may be necessary because the existing managers have been socialized into the long-established cultural ways of operating within the company and might find it difficult to see how things might be done differently. To resolve a crisis, the new leader should be able to make difficult decisions, motivate lower-level managers, listen to the views of others and delegate power when appropriate.

A company’s strategy and organization changes must also be made along with its leadership. These latter two important changes will be addressed in the next Business Corner column. CW